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| JNJ 6/21/22 Daily Chart |
Went long with a JNJ Aug 175 Call on 6/14/2022 for $3.52. At the time, the stock was 168. I entered due to the confluence of the AB/CD, 200sma, and 61.8% Fibonacci retracement. But I got in early, without confirmation. We got that confirmation today, with a close above the 8ema.
Here's what I saw today:
- Bounced off 61.8% Fibonacci of the Gartley pattern
- Bounced off 200sma
- Bounced off AB=CD of the Gartley pattern
- Oversold Stochastics
- ADX Quit the Down Trend
- Trend Kicker candlestick signal
- Close over 8ema
Set the Stop to 167, just below the D point.
Set the Target to 179, just below the .618AD level of the Gartley pattern.
Maximum Risk is the full cost of the Call option, $352. But a better gauge for comparison to other trades is to use the stock value:
Risk = 168 - 167 = $1.
Reward = 179 - 168 = $11.
R:R = 11/1 = 11:1 which is ridiculously great. To be fair, the initial risk wasn't the current Stop. The initial Risk was 168 - 155 = 13, which would represent a bad R:R.
Let's look at the R:R if I got the 175 Call option at the end of today, but based on stock price. Today's close for JNJ was 173.01:
Risk = 173 - 167 = 6
Reward = 179 - 173 = 6
R:R = 1:1 on this basis, which is considered too low. However, this trade is based on the Gartley pattern, which has a Win Rate of 75%. So, given the Win Rate, 1:1 is acceptable.
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